Ten Small Alaska Communities Drop City Insurance

December 8, 2004

Ten small Alaska communities have discontinued their municipal insurance because of declining assistance from the state and rising insurance and fuel costs.

Another dozen could follow within the next few months, said Kevin Smith, executive director of the Alaska Municipal League Joint Insurance Association.

Smith would not release the names of the communities affected, but the league confirmed that Juneau is not one of the 10 cities.

The league’s insurance program covers workers’ compensation, natural disasters, third-party injury liability and other costs for about 134 Alaska cities, boroughs and school districts.

Gov. Frank Murkowski vetoed $22 million in municipal revenue sharing last year that had helped many communities pay insurance costs. Combined with the rising costs of fuel, the cuts have made it impossible for some cities to continue paying.

“In the past when they could count on a municipal assistance and revenue-sharing check, we’d carry them until the state checks were cut,” Smith said. “They can’t pledge zero, so I can’t carry them. We carried them as long as we could and finally had to pull the plug.”

In an effort to offset the cuts, Murkowski sent $15 million to cities that same year in one-time federal money from President Bush’s Jobs and Growth Tax Relief Act, with minimum payments of $40,000 going to smaller communities.

This year Murkowski is asking the Legislature to approve $6.8 million in aid for about 125 small, rural communities.

The program would provide $25,000 for communities with fewer than 100 residents, $50,000 for those with 100 to 500 residents and $75,000 for those with 500 to 1,200 residents. The program is intended to offset rising fuel costs.

But it is unlikely that the revenue-sharing program will be reinstated this year as it existed before the cuts, said Becky Hultberg, a Murkowski spokeswoman.

“Things are still open,” she said. “We are still considering alternatives. The state this year will have some very important priorities, education being one of them. It is unlikely that insurance for cities would rise to that level. But the governor has recognized the needs of some of the smaller communities due to the disproportionately high cost of fuel and is making an effort to address those needs.”

The municipal league has made the reinstatement of some form of revenue sharing for cities its top priority this legislative session, which begins in January, according to program and policy coordinator Kathie Wasserman.

Insurance costs have increased substantially, according to Mike Black, director of the state’s Division of Community Advocacy.

Communities without insurance would have to appeal to the Legislature, Alaska’s congressional delegation or some other state or federal agency for assistance, according to Black. He said he has advised communities with municipal employees to maintain their workers’ compensation insurance policies because injured workers can sue the city, resulting in large court settlements.

“It’s required under state law that an employer have workers’ compensation insurance,” he said. “We tell them that’s something you have to retain.”

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